Lower inflation numbers boost markets; Sensex ends above 10,000

18 December 2008

Better-than-expected decline in inflation numbers and expectations of further rate cuts from the Reserve Bank played a key role in today's trade. Huge buying in rate sensitive, infrastructure, technology, and oil boosted the benchmark indices higher. The Sensex successfully closed above the 10,000 mark after 24 sessions and similer was the case with the Nifty, which settled above 3050 level.

Inflation for the week ended December 6 came in at 6.84% as against 8% on week-on-week basis. This was better-than-expected, as CNBC-TV18 poll saw inflation at 7.46%. Wholesale price Index (WPI) for all commodities fell 1.1% (WoW) to 231.1 and WPI for fuel and power index down 3.7% (WoW). Such an unexpected fall indicates that there may be rate cut in near term.

Commenting on inflation numbers which have fallen sharply, Mridul Sagar, Chief Economist, Kotak Securities, said inflation may fall to 3% by March and expects inflation in range of 3-4% next year. Sagar said he expects further rate cuts with inflation coming down.

Mridul Sagar, Chief Economist, Kotak Securities, said inflation may fall to 3% by March and expects inflation in range of 3-4% next year. Sagar said he expects further rate cuts with inflation coming down.

Yes Bank sees 100 bps repo cut and 25-50 bps reverse repo cut in January.

The Sensex has hit an intraday high of 10,110.34, before closing the day at 10,076.43, up 361.14 points or 3.72% over previous close. The Nifty shut shop at 3060.75, with a gain of 106.40 points or 3.60%, after hitting a high of 3072.55.